2014-01-22 Creating a more competitive steel company with global reach
Important information - forward-looking statements, etc. The presentation and the materials constituting it contain certain statements that are forward-looking. Actual results could differ materially from the future results expressed or implied by these forward-looking statements due to factors that are beyond SSAB s or Ruukki s ability to control or estimate precisely, such as the effect of general economic or political conditions, fluctuations in interest or exchange rates, changes in competition, the actions of courts, regulators, government agencies, competitors, customers, employees and other third parties, SSAB s or Ruukki s ability to implement successfully its plans and the timing thereof, the benefits from SSAB s or Ruukki s plans being less than anticipated, and other factors. These forward-looking statements speak only as of the date of this presentation. SSAB or Ruukki do not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this presentation, except as may be required by applicable securities laws. This presentation contains unaudited non-ifrs financial measures, including EBITDA, EBIT, net debt and free cash flow. These non-ifrs financial measures should be considered in addition to, but not as substitutes for, the most directly comparable measures under generally accepted accounting principles. This presentation is for information only and may not be published or distributed, in whole or in part, directly or indirectly, in Australia, Canada, Hong Kong, Japan, New Zealand, South Africa or any other country where such publication or distribution would violate applicable laws or rules or would require additional documents to be completed or registered or require any measure to be undertaken, in addition to the requirements under Finnish and Swedish law. Nor does this presentation constitute an offer of securities in the United States of America, Australia, Canada, Hong Kong, Japan, New Zealand or South Africa. Accordingly, neither this presentation nor any copy of it may be taken or transmitted into the United States of America, its territories or possessions, or distributed, directly or indirectly, in the United States of America, its territories or possessions or to any US person as defined in Regulation S under the US Securities Act 1933 (the "Securities Act"). The material set forth herein is for informational purposes only and is not intended, and should not be construed, as an offer to sell, or as a solicitation of an offer to purchase, any securities. The securities described herein have not been and will not be registered under the Securities Act, or the laws of any state, and may not be offered or sold within the United States of America, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state laws. This presentation is made to and directed only at (i) persons outside the United Kingdom, (ii) qualified investors or investment professionals falling within Article 19(5) and Article 49(2) (a) to (d) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order"), and (iii) high net worth individuals, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (such persons collectively being referred to as "Relevant Persons"). This presentation does not constitute a recommendation regarding the securities of SSAB or Ruukki. 2
Sverker Martin-Löf Chairman of the Board 3
Presenters SSAB Sverker Martin-Löf SSAB, Chairman of the Board (2003-) Industrivärden, Chairman of the board (2010-) Martin Lindqvist President and CEO (2011-) EVP SSAB EMEA, EVP SSAB Tunnplåt, CFO Photo Photo Rautaruukki Kim Gran Chairman of the Board (2012-) Nokian Tyres Plc, President and CEO (2000-) Sakari Tamminen President and CEO (2003-) Metso Corporation, EVP and CFO, Deputy to President and CEO (1999-2003) 4
Creating sustainable value for customers, shareholders, employees and society 5
Martin Lindqvist President & CEO SSAB 6
SSAB and Rautaruukki More competitive together The combined company will have a global position and product offering within high strength steels, heavy plate, standard strip, and tubular products Value creation through tangible synergies, improved earnings potential and increased flexibility & cost-effectiveness Offer recommended by both Boards of Directors and supported by the main shareholder in SSAB and in Rautaruukki respectively Annual cost synergies of up to SEK 1.4 billion Corresponding to a positive EPS impact of SEK 2 (fully diluted), to be compared with the consensus EPS estimate 1 for the combined company of approximately SEK 1 in 2013, SEK 1 in 2014 and SEK 3 in 2015 SSAB is making a share exchange offer to the shareholders of Rautaruukki with a premium of 20 per cent 2 1) Calculated out of the combined consensus for SSAB and Rautaruukki 7 2) Based on the three month volume-weighted average share prices of both SSAB and Rautaruukki
Agenda 1. SSAB and Rautaruukki in brief 2. SSAB and Rautaruukki - a strong industrial logic 3. Exchange offer and preliminary combined financial information 4. Key takeaways 8
SSAB in brief SSAB EMEA SSAB AMERICAS SSAB APAC Sales SEK 20 258m Sales SEK 16 173m Sales SEK 2 138m Producer and supplier of high strength steel globally (Q&T, AHSS) Standard steel products (strip and plate) Commercial heavy plate in North America High strength steel (Q&T) Sales and distribution of high strength steel (Q&T, AHSS) Kunshan finishing line TIBNOR SEK 5 961m Distributor of steel in the Nordic and Baltic region No. of employees: 8 720 Note: Sales refer to 2012 net sales Employees per 30 Sept 2013 9
Rautaruukki in brief Ruukki Metals Rukki Building Products Ruukki Building Systems Net sales 1 859m Net sales 452m Net sales 288m Special steel products Standard steel products Tubes and profiles Stainless and aluminum Residential roofing Building components Infrastructure construction/ components Nordics Russia CEE Functional building systems No. of employees: 8 750 Note: Sales refer to 2012 net sales (comparable) Employees per 30 Sept 2013 10
Agenda 1. SSAB and Rautaruukki in brief 2. SSAB and Rautaruukki a strong industrial logic 3. Exchange offer and preliminary combined financial information 4. Key takeaways 11
A combination with a strong industrial logic Flexible and cost effective production system to better adapt to changes in market demand Value creation through tangible synergies Accelerated growth in high strength steels, heavy plate, standard strip, and tubular products continue the shared strategic direction of both companies Enhanced ability to invest in product development and R&D innovation leader Equipped to continue the shared strategies of both companies A more competitive Nordic and US-based steel company 12
Complemental strengths and offerings 13
Global reach for the combined company Main production sites Sales coverage 14
Broadened steel production base in the Nordics 1 Luleå Steel-making 1 1 2 Borlänge Strip products 2 3 2 3 Oxelösund Steel-making, heavy plates 1 Raahe Steel-making, heavy plates and strip products 2 Hämeenlinna Strip products and tubes 15
Flexibility and synergies will create a more competitive Nordic production system Flexibility + Synergies Larger asset base to better adapt to varying market demands 5 Blast furnaces 2 Hot Strip mills 2 Cold Rolling mills 2 Plate mills Distribution system to serve both large and small customers Production synergies Line specialization Reduce underabsorption costs Energy and fuel rate optimization Non-production synergies Distribution synergies Purchasing Administration and overhead Headcount reduction Capex avoidance Reduced working capital 16
Increased flexibility in the Nordic blast furnaces production system to better meet changes in market demand Million tonnes 6.5 6.0 Nordic Slab Production / from 3.5 6.5 million tonnes Illustration of possible production scenarios 5.5 5.0 O O R R L 4.5 4.0 O O R R L 3.5 3.0 O O R R L 2.5 2.0 O O R R L 1.5 1.0 O O R R L 0.5 O O R R L 0.0 17
Expected annual synergies up to SEK 1.4 billion (EUR 150m) from a more efficient steel production system in the Nordic region Summary of expected synergies, SEK million Annual cost synergies One-off cash costs -350 1,000 350 1,350 Annual cost synergies of up to SEK 1.4 billion (EUR 150m) are expected (SEK 2 per share post-tax in the combined company). This corresponds to ~3% of the total cost base in the combined European system Estimated reduction in headcount, mainly in Sweden and in Finland, is approximately 5% of the total headcount in the combined company One-off costs for achieving the synergies are expected to amount to SEK 350m (EUR 40m) Source of expected synergies, % Out of the total annual synergies, SEK 0.35 billion (EUR 40m) will be achieved in periods of low market demand SG&A Purchasing Production In addition to cost synergies, there is a potential to avoid overlapping investments and to reduce net working capital Supply chain & Distribution Full synergy capture is expected within three years 18
Future organization of the combined company The plan is to organize the combined company in a model with clear profit and loss responsibilities Quenched and Tempered Steels European Flat Carbon Steels American Flat Carbon Steels Nordic Steel Distribution Construction Products and Systems Melker Jernberg (Sweden) Olavi Huhtala (Finland) Charles Schmitt (USA) Mikael Nyquist (Sweden) Marko Somerma (Finland) 19
Agenda 1. SSAB and Rautaruukki in brief 2. SSAB and Rautaruukki a strong industrial logic 3. Exchange offer and preliminary combined financial information 4. Key takeaways 20
Exchange offer with value creation for all shareholders 0.4752 newly issued SSAB class A shares and 1.2131 newly issued SSAB class B shares are being offered for each Rautaruukki share The total value of the offer amounts to SEK 10.1 billion (EUR 1.1 billion) The exchange offer corresponds to a premium of 20% compared to three-month volume-weighted share prices of both SSAB and Rautaruukki Value-accretive for all owners expected annual synergies posttax amounts to approximately SEK 2 per share in the combined company 21
Key conditions for the exchange offer Acceptance from more than 90% of Rautaruukki s shareholders The main shareholder in Rautaruukki, Solidium, has expressed its full support for the offer (40% of votes in Rautaruukki), and has undertaken to accept the exchange offer The AGM of SSAB must pass the resolutions necessary to implement the combination and the exchange offer The main shareholder in SSAB, Industrivärden, has stated its full support for the offer (23% of votes in SSAB) and has undertaken to vote in favor of the resolutions necessary to implement the combination and the exchange offer The transaction is subject to regulatory competition approval in the European Union, and in a limited number of other jurisdictions The combined company will have a primary listing on NASDAQ OMX Stockholm and will apply for a secondary listing on NASDAQ OMX Helsinki The Group headquarters will be in Stockholm 22
Pro-forma ownership (2013-12-31) Owner % Capital % Votes Industrivärden 10.5% 17.5% Solidium 16.8% 10.0% LKAB 2.2% 3.7% Swedbank Robur fonder 2.5% 3.4% Handelsbanken fonder 2.0% 2.8% Other shareholders 65.9% 62.6% Total 100.0% 100.0% Current SSAB shareholders 58.0% 75.0% Current Rautaruukki shareholders 42.0% 25.0% Industrivärden intends to remain as a long-term main owner of the combined company 23
Financials in the combined company - Solid balance sheet with potential for earnings improvement Jan-Sep, 2013 Full year 2012 SEK million Combined company SSAB Combined company SSAB Rautaruukki Rautaruukki Sales 41 680 26 102 15 578 63 259 38 923 24 336 EBITDA 2 157 1 049 1 108 2 968 2 491 477 EBITDA margin 5% 4% 7% 5% 6% 2% EBIT -595-849 254-977 -96-881 EBIT margin -1% -3% 2% -2% 0% -4% Operating cash flow 2 280 1 381 898 6 424 4 929 1 494 Steel shipments (thousand tonnes) 4 603 3 255 1 348 5 993 4 184 1 809 Employees 17 468 8723 8 745 Net debt 21 905 14 968 6 565 Net debt / Equity 59% 55% 74% Average SEK/EUR 2012: 8.704 Average SEK/EUR: Q1-Q3: 8.583 SEK/EUR 30 Sept 2013: 8.658 24
Agenda 1. SSAB and Rautaruukki in brief 2. SSAB and Rautaruukki - a strong industrial logic 3. Exchange offer and preliminary combined financial information 4. Key takeaways 25
Creating a more competitive steel company with global reach Value creation to all shareholders through tangible cost synergies and improved earnings potential Increased flexibility, cost-effectiveness and improved capital efficiency Strengthened customer offering innovation leader, broader product range and increased geographic presence Active move to create a more competitive steel company Secure long term competitiveness in an industry vital to Finland and Sweden Secure an important export industry Safeguard job opportunities in the long run Together we can move faster towards the vision to create a stronger, lighter and more sustainable world 26
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